As per our previous discussion[1] regarding the market adapting to the concept of presidential incumbent vulnerability:

“President Bush’s approval rating dropped to the lowest of his presidency in a poll taken after a week of revelations about abuse of Iraqi prisoners and questions about whether Defense Secretary Donald Rumsfeld should keep his job.

Forty-six percent of Americans approve of Bush’s job performance in the USA TODAY/CNN/Gallup Poll released Monday. That’s 3 percentage points lower than his 49% in three polls earlier this year. Majorities say they disapprove of how he’s handling Iraq and the economy.

”For an incumbent to be at 46% job approval at this point in an election year has historically always spelled defeat” for presidents since 1950, says Frank Newport, editor in chief of the Gallup Poll. But he says it’s a small sample; only eight presidents have sought re-election, five successfully.”

That’s the bad news for the incumbent. But all was not rosy for the challenger:

“Bush’s decline did not produce new support for Democratic candidate John Kerry among likely voters. In a hypothetical matchup, Kerry fell 2 points since last week — from 49% to 47% — and remained in a dead heat with Bush, who was steady at 48%.

Likely voters also gave Bush an edge in 16 states that were close in 2000. The poll shows Bush leading Kerry, 51%-46%. They were tied at 49% in mid-April. The states are Arkansas, Florida, Iowa, Maine, Michigan, Minnesota, Missouri, Nevada, New Hampshire, New Mexico, Ohio, Oregon, Pennsylvania, Tennessee, Washington and Wisconsin.”

The caveat is that the election is still 6 months away. No one (but the stock market and hard core partisans) are paying much attention yet. So anything can happen — and probably will — happen.